The Must Read PSA Weekly Research Round-up (week to 03 Aug)

Reports published this week on TDK’s (6762 JP) Impressive 1Q Numbers / Result comments on as Sony (6758 JP) smashes 1Q forecasts, SBI’s (8473 JP) fantastic 1Q results, Toyota’s (7203 JP) excellent 1Q results & Sega Sammy (6460 JP) in the black / Weekly Insight: Sega Sammy the most promising casino play / Telecom engineering names look well set and they are good value

The Weekly Comment by Pelham Smithers

Seven months into 2018 and the key to performance in Japanese equities has generally been micro and not macro. You can get a bit of alpha from macro-related stock selection, but the record is patchy. A look at the best- performing Topix 100 stocks this year gives the market a strong defensive feel with Daiichi Sankyo [DSK] (4568 JP), Eisai (4523 JP), Yamato Holdings (9064), Shiseido (4911 JP) and Astellas (4502 JP) at the top. However, you’ve got Takeda (4502 JP) down at the bottom, and the likes of JT (2914 JP), Ajinomoto (2802 JP) and JR East (9020 JP) doing poorly. Conversely, deep cyclicals are probably worse for choice, as the likes of Nippon Steel (5401 JP) and Sumitomo Metal Mining (5713 JP) are at the bottom, but offsetting that you’ve got good performances from JXTG (5020 JP), Marubeni (8002 JP) and Asahi Kasei (3407 JP). As for tech, it really has been all over the place. Murata (6981 JP), Hoya (7741 JP) and Sony (6758 JP) are in the Top 10, but Rakuten (4755 JP), SMC (6273 JP) and Mitsubishi Electric (6503 JP) are in the bottom 10.
Hindsight being a powerful investment tool, it is easy to identify micro factors that drive most of these major stock price moves, positive or negative. Eisai and DSK have both been beneficiaries of positive development news for drugs with significant potential indications (Alzheimer and cancer respectively), Yamato has enjoyed a significant price hike, while Murata (MLCCs) and Hoya (EUV photomasks) are seeing strong demand for specific product lines. A recent downward revision by Nippon Steel underscores how tough the steel industry is finding things at present, while Takeda and Rakuten are two companies facing tougher competition and whose solutions are probably scarier than the original threat.

Reports / Flash Notes Published This Week: Headlines at a Glance

1. TDK: Impressive 1Q Numbers

Company / Sector / Thematic Comments at a Glance

Technology: Consumer Electronics, Gaming

1. TDK 1Q OP Up 53%
2. Panasonic Ups LiB Capacity at Tesla
3. The Panasonic Conundrum
4. Sony 1Q Smashes Forecasts
5. Capcom Delivers Record 1Q
6. Capcom Establishes eSports Division
7. Nintendo Doubles OP
8. Sega 1Q in the Black
9. GungHo Reported Another Quarter of Contraction

Technology: Electronic Components and Precision

10. Murata 1Q OP Up 15%
11. Readthrough from Apple’s 3Q
12. Foster Electric in Weak 1Q, Revises Down
13. 5G Engineering Plays Report 1Q

Technology: Bitcoin / Cryptocurrency and Blockchain

14. Fantastic 1Q Results from SBI

Chemicals / Materials

15. Fujifilm and Xerox Still at Loggerheads
16. Comments on Q1 Figures from JSR and Dexerials
17. Teijin up on Announced Share Buyback
18. Nitto Denko’s Strong 1Q
19. Whistle-stop Round the Chemicals
20. Konica Minolta’s 1Q surge in OP
21. Nippon Shokubai’s Strong 1Q; Higher 2Q Costs Loom

Autos

22. Honda: Decent Q1 Performance but Mexico Plant Flood and Currency to Hurt FY18 Results
23. Mazda 1Q: Rising Expenses Weigh on Profitability
24. Toyota Delivers Excellent 1Q Results

Auto Parts / Machinery

25. Cautious Excavator Sentiment
26. KHI Q1 Issues Temporary
27. Aisin Q1 Positive, Denso Disappoints
28. Nabtesco Takes H1 Write-off
29. NOK: Continued Weak 1Q FPC Earnings

Telecom

30. KDDi in 1Q “Miss”

Internet / Commerce

31. Yahoo Japan’s Q1 FY18 Beats
32. Start Today’s 1Q: Positive Development of ZOZO Continues
33. Kakaku.com: 1Q Missed

Pharma

34. Eisai Considering Conditional Approval Application for BAN-2401

List of PSA Published Reports Since Q2 2018 to Date

PSA Company Visits, Tours and Interviews

• Visited: TDK (6762 JP), Hitachi Chemical (4217 JP)
• Attended earnings meetings at: Sekisui Chemical (4204 JP), TDK (6762 JP), Nippon Electric Glass (4214 JP), Zeon Corp (4205 JP), Konica Minolta (4902 JP), Hoya Corp (7741 JP), iStyle (3660 JP), Megachips (6875 JP), Nihon M&A Center (2127 JP), Murata (6981 JP)
• London meeting with Nidec (6594 JP)
• Interview / Conference Call with: LINE (3938 JP)
• Participated in earnings call with: Start Today (3092 JP), Dexerials (4980 JP), Sumitomo Chemical (4005 JP), Nitto Denko (6988 JP), Taiyo Nippon Sanso (4091 JP), Mitsubishi Chemical Holdings (4188 JP), Teijin (3401 P), Asahi Kasei (3407 JP), Mitsui Chemicals (4183 JP), Minebea-Mitsumi (6479 JP), Denso (6902 JP), Aisin Seiki (7259 JP), KHI (7012 JP), Toyoda Gosei (7282 JP).

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